The Nitty Gritty on Alberta’s Coal Phase-Out

It’s a sentence that feels weird to write: by 2030, Alberta will have shuttered the 18 coal-fired power plants that currently generate around 55 per cent of the province’s electricity, with two-thirds of that power replaced by renewable sources.

The stunning move was announced as part of Alberta’s climate change policy framework that was released on Sunday. According to the government, only 12 of the 18 coal-fired power stations would have been phased out by 2030 under the previous arrangement.

The immediate health benefits of such a move are tremendous.

Kim Perrotta, executive director at Canadian Association of Physicians for the Environment (CAPE), says that coal accounts annually for an estimated 107 premature deaths, 80 hospital visits and almost 5,000 asthma-related sick days in Alberta, costing the province around $300 million.

Prior to the government’s announcement, over 40 organizations — including the Alberta Medical Association and Asthma Society of Canada — made a joint call for an accelerated phase-out on health grounds.

“We see the air quality benefits that are fairly immediate that would be felt by the people in Alberta,” Perrotta says. “But we also want to reaffirm that as an organization run by physicians, we actually believe climate change is the public health challenge of the century. So we think this is a huge win for public health in terms of the the immediate benefit for Albertans but also for the long-term benefits for public health around the globe.”

Coal is responsible for 17 per cent of Alberta’s greenhouse gas emissions and six per cent of emissions nationwide.

While a faster ramp-down of coal would have been possible, that likely would have lead to a great proportion of power generation coming from natural gas, says Dan Woynillowicz, policy director at Clean Energy Canada.

“So I think it’s a good approach that’s going to lead to a significant amount of renewable electricity generation in the province and a diverse supply of electricity,” Woynillowicz says.

Coal-related Job Losses and Disputed Compensation

To be sure, not everyone’s happy about the decision. The mayors and reeves of 30 Albertan municipalities signed an open letter to Premier Rachel Notley prior to the announcement noting the phase-out will likely come at the cost of jobs and tax revenue.

The mayor of Hanna — the same town which exported Nickelback — reiterated that argument on Tuesday, suggesting the loss of 200 jobs coming with the closure of the local coal mine and power station will be “devastating.”

Woynillowicz acknowledges such concerns, noting that institutions like NAIT, SAIT, the University of Lethbridge and Medicine Hat College are already offering training in the renewable energy sector.

“That’s going to create all kinds of new investments and job opportunities in the province,” he says. “The government is committed to ensuring that for workers and communities that transition occurs as smoothly as possible. We’ve got the capacity to train the workforce we need so I think there’s definitely opportunity there.”

Some coal power plant owners have argued they will deserve some compensation from the province due to the forced phase-out. However, a recent report authored by Tom Marr-Laing and Ben Thibault for the Pembina Institute contended that a great majority of power purchase agreements were struck with coal operators before the deregulation of the electricity market in 2001 and that the “Effective Life of the Unit” — guaranteeing a “fair return on capital” — would be completed by 2030 for all but two plants.

As a result, Marr-Laing and Thibault concluded in the report that 16 of the 18 stations can be retired without the need for compensation. Marr-Laing says in an interview that many of the older plants will receive between a six and 10 per cent return on equity, which constitutes a “heck of a return.” However, compensation may be required in the cases of Capital Power’s Genesee 3 (built in 2005) and Keephills 3 (built in 2011), even though a phase-out has been discussed for upward of 20 years.

“We actually don’t owe them anything, technically, but it may behoove us in Alberta to say some form of compensation may be appropriate for those two units rather than simply saying ‘tough, you lose a billion bucks,’ Marr-Laing says in an interview. “It sends a useful signal to the new investors we want to come to the table to invest in renewable energy and gas that there’s an example of having being treated fairly, at least.”

Controlling Prices During the Transition

The potential rise in electricity costs is yet another factor that’s received plenty of attention. Plenty have pointed to Ontario — which has experienced spiking rates in recent years — as an example of why the transition won’t work.

But Woynillowicz says the Ontario comparison is unjustified considering the need for the province to upgrade its grid infrastructure and refurbish nuclear plants. He says that Alberta may be entering the renewable energy market at the exact right moment, given plummeting prices for technology and the presence of increased competition between different developers. Alberta’s new energy efficiency program could also help reduce costs for electricity and heating, counterbalancing any price increase.

But Woynillowicz also stresses it’ll be very important for the government to keep Albertans up-to-date on what’s happening with the revamp of the system.

“I think we need to avoid a situation, to the extent we do see increases [in cost], that isn’t just attributed to renewables,” he says. “The reality is it’s a relatively aging power system that’s going to need upgrading regardless. The government and Alberta Electricity System Operator and renewable electricity developers are going to have to ensure they are very open and transparent in terms of how the electricity system in Alberta is evolving and being willing to discuss that. They can’t just put the policy in place and just stop talking about it.”

At this point, Alberta is by far the largest consumer of coal in the country, although Saskatchewan and Nova Scotia are also high consumers of the dirty fuel.

“We’re seeing other jurisdictions wanting to step up and also deliver leadership on this,” Woynillowicz concludes. “Everybody is beginning to finally recognize there’s opportunity in this: that it’s going to be a better economic strategy than lagging behind, trying to fight something that has so much momentum.”

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On Friday, the federal government released its long-awaited draft regulations for the phase-out of coal-fired power in Canada. It was a huge move — the first step to fulfilling a central piece of the government’s pledge to “transition to a low-carbon economy” via the Pan-Canadian Framework.